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2013 (7) TMI 646 - AT - Income TaxColourable transaction - Exemption u/s 10(38) - long term capital gain - the assessee-company sold the holding of manority shares to M/s. DLF Commercial Developers Ltd. (DLF-CDL), which is a subsidiary of M/s. DLF Universal Ltd - The assessee-company claimed exemption from taxation for the above sum of long-term capital gains on the ground that the sales were made through a stock exchange and securities transaction tax (STT) was paid as provided under section 10(38) of the Income-tax Act, 1961. - In the previous year relevant to the assessment year under appeal, BFSL acquired land for ₹ 3.75 crores from M/s. Bhoruka Steels Ltd., which is another company of Bhoruka group – Held that:- Though BEIL, BFSL and Bhoruka Steels Ltd. are different corporate entities for the purpose of the Companies Act, they are all controlled by the same interest group of Agarwal family as common shareholders which is very prominent in the entire course of transaction involved in the present appeal - The assessee and its group associates along with the concerned individuals of the same group held 98.73 per cent. of the shares in BFSL, it means without any contradiction that the assessee along with its group owned all the assets and properties of BFSL even though those assets and properties are technically held in the name of BFSL as an independent corporate entity. Once this corporate veil is pierced, which is within the powers of the Revenue authorities, we find that the properties and assets of BFSL were held and de facto owned by the assessee-company and its group – Landed property purchased for ₹ 3.75 crores has become substantially the property of DLF-CDL when 98.73 percent in BFSL were transferred to DLF-CDL on sale - If the formalities of the transactions and the legal nature of the corporate bodies are ignored for a moment, the stark fact coming to surface is that the assessee's group has sold the property belonging to one of its concerns to DLF-CDL for a consideration of more than ₹ 89 crores through the medium of sale and transfer of shares which property was purchased for ₹ 3.75 crores and thereby made attempt to avoid payment of short-term capital gains tax – Decided against the Assessee.
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